Algorithm-based pricing changes are now common. Some laws are pushing back. Westend61 via Getty
Online shoppers in New York are now seeing a new warning on product pages thanks to consumer protection legislation that took effect in early November. Particularly noticeable during Black Friday sales were messages that told shoppers: "This price was set by an algorithm using your personal data."
This piece of legislation requires companies (with exceptions for rideshare apps) to show buyers when they use surveillance pricing to set online prices, potentially raising costs for some people while lowering them for others.
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So what data are these companies collecting to shift prices? Well, unlike surge pricing, this type of algorithm pricing calculates data related to the individual person or device. That could include the type of device (Android versus iPhone, etc.), your account's browsing history, recent purchases made from that browser and -- most importantly -- your location.
In other words, reported examples have shown that items like eggs will increase in cost for wealthy neighborhoods while staying at lower standard costs for less prosperous zones. But it can get far more complicated than that: Some pricing algorithms study millions of online purchases to predict buyer patterns.
A representative for the New York Senate didn't immediately respond to a request for comment.
Is surveillance pricing legal?
So far, yes. What laws like this New York legislation do is enforce transparency about what may be affecting prices, instead of banning it. And even that was too much for business groups, which immediately sued to block the law in federal court, alleging that it violates the businesses' First Amendment rights.
It's not clear whether companies are complying with the law as directed, or what it fully entails, either. The bill requires "clear and conspicuous disclosure" near the price, but some companies appear to be putting the information in a harder-to-spot area behind an information icon at the bottom of a pop-up.
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